Mining Eye                                      Q3 2012Ernst & Young’s Mining Eye            Q3 2012: the funding challeng...
Q3 2012 Mining Eye in review       Chart 1. Mining Eye index and FTSE AIM All-Share index                                 ...
The Ernst & Young Mining Eye index lost 3% over Q3 2012 —                                            The funding challenge...
Mitigating risk and optimizing                                      and its copper-gold drilling campaign               to...
Indian Pacific Resources to earn up to a 90%     prove invaluable cornerstone investors              Hummingbird Resources...
Winners in Q3 2012    Chart 6. Mining Eye index and FTSE AIM All Share index since 2004    Source: Ernst & Young, Thomson ...
Fallers in Q3 2012    Chart 7. Mining Eye index, gold, copper and LME Index over Q3 2012    Source: Ernst & Young, Thomson...
Ins and outs of the AIM mining universeFive companies joined AIM this quarter, one            Chart 8. Value of AIM mining...
Fundraising in Q3 2012      Chart 10. Quarterly trend of funds raised on AIM — mining and all sectors      Source: Ernst &...
Fundraising on AIM, 2006–2012Source: Ernst & Young analysis of AIM market statisticsTable 1. Fundraising on AIM, 2006–2012...
Index constituents selected at start ofeach quarterSource: Ernst & Young; Thomson Datastream Q2 2012                      ...
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Ernst & Young Mining Eye Q3 2012

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Ernst & Young’s Mining Eye index monitors the performance of AIM mining companies on a weekly basis and can be viewed at www.ey.com/uk/miningeye.

Movements and analysis of the index are reported in this quarterly publication.

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Ernst & Young Mining Eye Q3 2012

  1. 1. Mining Eye Q3 2012Ernst & Young’s Mining Eye Q3 2012: the funding challengeindex monitors the performance ►► he Mining Eye index fell 3% over Q3 2012 — an encouragingly flat performance T ►of AIM mining companies on a compared with the dramatic 30% fall since January 2012. Strengthening metalsweekly basis and can be viewedat www.ey.com/uk/miningeye. prices and signs of improved growth in North America and China providedMovements and analysis of some support, although the mining sector continues to underperform the widerthe index are reported in this AIM market.quarterly publication. ►► owever, financing conditions on equity markets remain challenging for juniors H ► miners, with quarterly equity proceeds raised by the sector on AIM at their lowestErnst & Young also produces a since Q3 2004 (at £84m). Risk aversion among investors is being met with reluctancesimilar index for the oil and gas from companies to further dilute holdings of existing shareholders at current sharesector, which can be viewed at prices.www.ey.com/uk/oilandgaseye. ►► 3 2012 saw the early signs of distress that became widespread in the aftermath Q ► of the 2008 financial crisis, with a small but symptomatic number of companiesTo receive copies of the reporting distressed asset disposals, strategic reviews and last-resort financing.Mining Eye, please contactOlivia Russell on ►► ut creative cost and capital management is so far helping to sustain the majority B ►+44 (0)20 7951 5559 or email through these turbulent times — cost-cutting, non-core asset sales, fast-tracked cashorussell@uk.ey.com. To receive generation options, and the attraction of strategic, long-term investment partners.copies of the Oil and Gas Eye,please contact Rebecca Hanifinon +44 (0)20 7951 6682 or email Mines & Money 2012rhanifin@uk.ey.com. The Ernst & Young Mining & Metals group is a proud sponsor of Mines and Money London.Area Contact: Come and meet Ernst & Young’s Mining team on 4–5 December at the Business Design Centre,Lee Downham Islington, London to hear about our latest insightsGlobal Mining & Metals Transactions in the sector.LeaderErnst & Young, UKI+44 (0)207 951 2178downham@uk.ey.comThe Mining Eye is written by:Emily Colborne+44 (0)121 535 2086ecolborne@uk.ey.com
  2. 2. Q3 2012 Mining Eye in review Chart 1. Mining Eye index and FTSE AIM All-Share index Chart 2. Mining Eye index and peers over Q3 2012 performance over Q3 2012 Source: Ernst & Young, Thomson Datastream Source: Ernst & Young, Thomson Datastream 2,000 2,000 1,800 1,800 Index value Index value 1,600 1,600 1,400 1,400 1,200 1,200 02 Jul 12 09 Jul 12 16 Jul 12 23 Jul 12 30 Jul 12 06 Aug 12 13 Aug 12 20 Aug12 27 Aug 12 03 Sept 12 10 Sep 12 17 Sep 12 24 Sep 12 02 Jul 12 09 Jul 12 16 Jul 12 23 Jul 12 30 Jul 12 06 Aug 12 13 Aug 12 20 Aug 12 27 Aug 12 03 Sep 12 10 Sep 12 17 Sep 12 24 Sep 12 Mining Eye FTSE AIM All-Share (rebased) Mining Eye S&P/TSX Composite Metals & Mining FTSE AIM Basic Resources (rebased) (rebased) FTSE All Share Mining (rebased) S&P/ASX 300 Metals & Mining (rebased) Chart 3. Mining Eye index and FTSE AIM All-Share index Chart 4. Mining Eye index and peers, last 12 months performance, last 12 months Source: Ernst & Young, Thomson Datastream Source: Ernst & Young, Thomson Datastream 3,500 2,800 2,600 3,000 2,400 Index value 2,200 2,500Index value 2,000 1,800 2,000 1,600 1,400 1,500 1,200 1,000 1,000 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sep 12 Oct 11 Nov 11 Dec 11 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Sept 12 Mining Eye FTSE AIM All-Share (rebased) Mining Eye S&P/TSX Composite Metals & Mining FTSE AIM Basic Resources (rebased) (rebased) FTSE All Share Mining (rebased) S&P/ASX 300 Metals & Mining (rebased)2 Ernst & Young Mining & Metals Mining Eye Q3 2012
  3. 3. The Ernst & Young Mining Eye index lost 3% over Q3 2012 — The funding challenge is compounded in an environment of higha fall that compares favourably with the 28% fall seen over the and increasing operating costs, weakness in certain commodities,first half of the year. Nevertheless, this was still a significant and unforeseen operational challenges, which can quickly andunderperformance of the 3% gain by the AIM All-Share index. dramatically impact short-term working capital. The tighteningA positive upward movement in commodity prices helped to availability of equity (and absence of available debt) reducesmitigate the severity of the fall, the LMEX index gaining 10% financial headroom and impacts companies’ ability to swiftlyand gold 11%. The majors fared a little better with the FTSE address unexpected cash flow shortfalls or capital outlays. WeMining index gaining a modest 2% over the quarter. have seen the material impact of these conditions on a small but nonetheless significant number of AIM miners this quarter in theThe upward momentum in commodity prices, while providing form of distressed asset disposals; high-cost, last-resort financingsome support, has not been fully reflected in equity prices. This (such as share subscription agreements); operations being placedcontinuing disconnect is leading companies to consider themselves on care and maintenance; and strategic reviews.significantly undervalued by the market. The market values ofnearly two-thirds of AIM miners were trading at over 30% below Fluormin announced a strategic review of its flagship Witkoptheir 52-week highs at the end of Q3 2012. fluorspar mine, resulting in the mine being placed into care and maintenance due to ongoing weakness in the fluorspar market.Despite a tentative recovery in prices towards the end of the The directors of Norseman Gold, which is developing the Norsemanquarter, financing conditions on global equity markets are gold mine in Western Australia, placed its operating subsidiaryproving continually challenging, giving little grounds for any into voluntary administration. A series of operational challengescertainty over the short-term outlook. Globally, IPO volumes at the mine meant that production fell short of expectations,in the sector have retreated to 2009 levels, with average proceeds critically impacting short term cash flow. Noventa arranged araised by junior IPOs just US$3.3m. On AIM, there was only refinancing package described as its “only realistic option” to staveone mining IPO (Wishbone Gold) in the third quarter, taking the off insolvency and in order to proceed with the development of itsnine month total to just four IPOs.1 Global equity proceeds from projects in Mozambique. The initial proposed unsecured US$16msecondary offerings of equity by junior miners have fallen 41% facility and longer-term secured facility of up to US$35m carriedyear-on-year, indicating the extent of negative investor sentiment a punitive annual interest rate of 25%.and the expensive financing option that equity has become. OnAIM, proceeds fell to £81m by 34 companies in Q3 2012, from£96m by 31 companies in Q2 2012, and £114m by 18 companiesin the same period a year ago. Chart 5. Share price movement over Q3 2012 by commodity group Source: Ernst & Young, Thomson Datastream Technology minerals Gold Fertlilizer minerals Diamonds and precious stones Base metals Other Uranium Iron ore PGMs Coal -20% -10% 0% 10% 20% 30%1 See page 8 for details of other new admissions in Q3 2012.Company information sourced throughout from publicly available sources, including company websites and regulatory announcements. Ernst & Young Mining & Metals Mining Eye Q3 2012 3
  4. 4. Mitigating risk and optimizing and its copper-gold drilling campaign to complement Kibo’s existing activities in in Mongolia. Pan African Resources Tanzania. Kibo believes it will benefit fromcapital announced plans to dispose of its Manica economies of scale and the “optimizationDespite constrained access to capital, we gold exploration project to Terranova of operational capacity on the ground”2.are seeing a junior industry in 2012 that is Minerals for a potential consideration Coal company Altona Energy completed itssmarter and leaner than it was in 2008–09. of £4m cash and shares in the enlarged acquisition of advanced exploration licencesJuniors are responding creatively and Terranova. The disposal will allow Pan in China — described as “transformational”,opportunistically, pursuing growth through African to focus on its core operating assets with the potential for near-term,successful attraction of alternative funding; in South Africa, while maintaining potential sustainable cash flow. Targeting productionmitigating risk by building in options; and upside benefit from Manica’s development, in 2013, Altona said the acquired assetsoptimizing capital by focusing limited and raise cash for the construction and would mitigate the need to raise additionalresources on core assets. In Q3 2012, development of its Bramber Tailings equity as it continues the longer-termwe saw examples of: Retreatment project. development of its coal-to-liquid Arckaringa►► on-core asset disposals N ► Alternative revenue streams project. The company also cited the benefit of access to Chinese demand, raising the►► lternative revenue streams A ► Some took advantage of opportunities possibility of a Hong Kong cross-listing. to generate interim cash flow from►► ynergistic acquisitions S ► supplementary assets to fund the Farm-out agreements►► arm-out agreements F ► advancement of core assets toward Farm-outs involve the assignment production. Jubilee Platinum, which holds►► trategic partners and alternative S ► of an interest in mineral projects to a a 51% interest in power generation funding structures third-party. It provides the “farmor” company, Power Alt, received approval from with the option of maintaining interestNon-core asset disposals the National Energy Regulator of South and ownership while reducing operating Africa to sell surplus electricity to a thirdA number of companies announced (non- risks and costs — potentially enabling the party, a deal expected to increase earningsdistressed) disposal of non-core assets company to oversee the development of potential and profitability.in order to raise cash and focus limited a project that it would not otherwise haveresources and management attention on Synergistic acquisitions the cash to develop. African Consolidatedassets central to the core strategy. Resources (ACR) announced that Galileo We saw examples of companies investing Resources would be farming in to its rareFor example, Central Asia Metals for sustainable, synergistic and near-term earths joint venture, the Nkombwa Hill Rareannounced an agreement to dispose of its growth through small-scale acquisitions. Earth project, in north-east Zambia. ACREreen and Handgait Mongolian assets to Kibo Mining announced the reverse welcomed Galileo’s technical rare earthsMongolian Resource Corporation, allowing takeover of Mzuri Energy and Mayborn expertise and management track record atthe company to focus on production at its Resource Investments, which hold coal and fast tracking exploration projects. JubileeSX-EW Kounrad copper plant in Kazakhstan uranium exploration projects in Tanzania Platinum entered into an agreement for2 Results of Extraordinary General Meeting, Kibo Mining regulatory news release, 6 September 2012.4 Ernst & Young Mining & Metals Mining Eye Q3 2012
  5. 5. Indian Pacific Resources to earn up to a 90% prove invaluable cornerstone investors Hummingbird Resources announced thatinterest in all commodities except PGMs, throughout the project development it is in discussions with the InternationalLME-traded metals and chrome on Jubilee’s cycle — but invariably with terms and Finance Corp over a possible US$5mAmbodilafa tenement area in Madagascar. conditions attached. strategic equity investment. The company’sThe agreement will give Jubilee potential CEO described the possible investment as Amara Mining (previously Cluff Gold)exposure to iron ore with no initial funding a significant endorsement of the viability announced the formation of a strategicon its part. of its Dugbe 1 iron ore project in Liberia, alliance with Samsung C&T Corp, as well as a door-opener to potential futureStrategic partners and alternative commencing with a US$20m unhedged debt financing.funding structures offtake debt facility. Amara has one producing mine, the Kalsaka gold mine inStrategic investors, particularly private Burkina Faso, and a number of developmentwealth in the form of Chinese state-owned stage assets. The partnership will seeenterprises and Japanese trading houses, Samsung gain access to gold bullion supplycontinue to take interest in the junior in return for provision of financial supportresources sector in their quest for security to Amara — particular for the developmentof supply. Less influenced by short-term of the Baomahun project in Sierra Leone.market sentiment, such investors can Outlook The outlook for equity markets remains uncertain and unpredictable, with the apparent disconnect between asset prices and commodity valuations showing little sign of abatement. As a result, expect that many shareholders will continue to view equity as an expensive and dilutive option of last resort at current valuations. For those in a position of choice, alternative funding, particularly debt, is likely to be sought, potentially from non-traditional sources, until equity market conditions consistently show improvement. The major producers are responding to the changing industry conditions with a shift in priorities: from “growth for growth’s sake” to a focus on cost control, credit quality and disciplined growth that optimizes short-term returns to shareholders. This is shaping mergers and acquisitions activity in 2012. Our expectation is that one of the consequences will be a focus on “lower-risk”, strategic minority foothold acquisitions and that this may open up further, long-term funding options to the junior sector. We also expect to see a continued flow of capital (both debt and equity) from Asian and Middle Eastern investors, and also potentially private capital, into advanced exploration projects. Competition for such long-term investment will be intense. Early stage juniors are faced with fewer options and we expect to see companies raising capital wherever they can — at some risk to financial flexibility and control over projects. Cost containment and the allocation of management and financial resources towards core projects must remain the priority. These are challenging times, with clear implications for the longer-term exploration pipeline.5 Ernst & Young Mining & Metals Mining Eye Q3 2012 5
  6. 6. Winners in Q3 2012 Chart 6. Mining Eye index and FTSE AIM All Share index since 2004 Source: Ernst & Young, Thomson Datastream 3,500 3,000 2,500 Index value 2,000 1,500 1,000 500 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 Mining Eye FTSE AIM All-Share (rebased)►► Condor Gold saw the largest increase renewed strategic focus, following its of polyhalite, a multi-product potash in its share price this quarter, gaining decision to abandon its option on the ore. Drilling is now underway to further 208% following a series of positive Long Lake gold property in Canada. delineate the resource in order to drilling resources at its 100%-owned secure financing for the project, while ►► Botswana Diamonds announced the La India gold project in Nicaragua. In the company also launches the planning recovery of first diamonds from its September, the company announced an application process. sampling project in Cameroon. While upgraded mineral resource of 16.2mt of industrial quality, the gems confirm ►► African Consolidated Resources at 4.6 g/t for 2,375,000 oz gold, the diamondiferous potential of the announced a significant upgrade including 5.3mt at 4.4 g/t for 751,000 deposit. Next steps for the company are to its resource estimate at its Pickstone- oz gold in the Indicated category to undertake bulk sampling to identify Peerless gold project in Zimbabwe. (to CIM3 standards). Subsequent to grade per tonne and value per carat, The company reported an increase quarter-end, Condor announced the alongside a scoping study to explore the to 36.63mt containing 3.2m ounces strategic acquisition of the adjacent project’s feasibility. The company is also of gold at a grade of 2.7g/t gold, of La Mojarra concession which the progressing exploration on its Orapa which over 50% is in the Measured and company believes the La India resource prospect in Botswana. Its share price Indicated category (JORC-compliant). may extend into. gained 56% over Q3 2012. African Consolidated Resources is►► Sunrise Resources’ share price initiating a bankable feasibility study, ►► Among the larger-cap companies, gained 112% over the third quarter. targeting production of over 100,000 Sirius Minerals gained 45% with a The early-stage exploration company ounces per year — which the company series of positive drilling updates on has started drilling on its Cue diamond says would be more than double the its York Potash project in the UK. and Derryginagh barite projects, in output of Zimbabwe’s existing largest This follows the announcement of its Australia and Ireland, respectively. mine. ACR’s share price closed the maiden resource in June, in which The results of the drilling had yet to be quarter up 17%. the company reported “the world’s confirmed at quarter-end, but investors largest and highest grade resource” appeared to welcome the company’s3 Canadian Institute of Mining, Metallurgy and Petroleum (CIM) Standards on Mineral Resources and Mineral Reserves.6 Ernst & Young Mining & Metals Mining Eye Q3 2012
  7. 7. Fallers in Q3 2012 Chart 7. Mining Eye index, gold, copper and LME Index over Q3 2012 Source: Ernst & Young, Thomson Datastream 2,000 1,800 Index value 1,600 1,400 1,200 02 Jul 12 09 Jul 12 16 Jul 12 23 Jul 12 30 Jul 12 06 Aug 12 13 Aug 12 20 Aug 12 27 Aug 12 03 Sep 12 10 Sep 12 17 Sep 12 24 Sep 12 Mining Eye LMEX Index (rebased) Gold (rebased) Copper (rebased)►► Ironveld suffered a disappointing Mooiplaats colliery, and the withdrawal quarter. Copper Development Corp performance following its placing of BEE partner Exxaro Coal Proprietary remains subject to an ongoing dispute and readmission to AIM in August, from its right to a 30% participation in with the Philippines Government over with a 65% fall over the period. The the Makhado coal project, negatively the Basay exploration permit, causing company, previously Mercury Recycling impacted share price performance. shares to fall 45% over Q3 2012. Group, acquired the South African iron Post quarter-end, a proposed strategic Richland Resources’ share price ore assets of Sylvania Platinum and partnership with, and US$100m also lost 45%, following reports of intends to mine Ti-magnetite ore as equity investment by, Haohua Energy ongoing illegal mining activities at its feedstock for its own pig iron plant. The International (Hong Kong) helped Tanzanian gemstone properties, and company has retained its lamp recycling shares to a brief recovery. the likely negative impact of this on businesses, which suffered losses in the the company’s interim financial results. ►► Galantas Gold lost 46% over the third first half of the year. The company’s shares were temporarily quarter, despite positive results from suspended in early October, following►► Coal of Africa’s share price suffered a preliminary economic assessment on a claim for retrospective royalties a significant fall over the quarter its Omagh gold property in Northern from the Tanzanian Government and a (59%), against a backdrop of a weak Ireland. Problems regarding planning provisional ban on gemstone exports. thermal coal market. The company consent have led the company to Richland disputes the claim, and closed the quarter with a market value announce a reduction in its workforce. export rights were reinstated on an of just £116m, from £246m a year ►► Disputes with host governments interim basis, pending a re-audit of the ago, as the global thermal coal price affected both Copper Development financial records. fell 31% over the same period. Strike Corp and Richland Resources in the action at the company’s South African Ernst & Young Mining & Metals Mining Eye Q3 2012 7
  8. 8. Ins and outs of the AIM mining universeFive companies joined AIM this quarter, one Chart 8. Value of AIM mining universe and as % of all AIM, 2004–2012through IPO, and the rest via introductions Source: Ernst & Young analysis of AIM market statistics; market values as at quarter-endand market transfers. The size of our AIMuniverse of mining and mining-related 25,000 30%companies stands 170 strong at the end of 25%Q3 2012. The total value of the universe 20,000 Mining market value GB£mwas £8.6b at quarter-end, representing a Mining as % of all AIM 20%slight increase (2%) in quarter-on-quarter 15,000value. 15% 10,000Admissions 10%►► Wishbone Gold was the quarter’s only 5,000 5% IPO, raising £0.5m in a July listing on AIM. The company, which has two gold 0 0% concessions in Australia, is headed by Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 ex-Sirius Minerals CEO Richard Poulden and aims to consolidate “viable” Mining Mining as a % of all AIM (RH scale) gold projects to become a globally- diversified precious metals company.►► Ironveld was admitted to AIM in ► August, following the reverse takeover Chart 9. AIM mining admissions and delistings since 2006 of iron ore assets in South Africa by Source: Ernst & Young analysis of AIM market statistics; includes placings, introductions and readmissions; excludes transfers to and from the Main Market AIM-listed Mercury Recycling Group. Ironveld owns a vertically-integrated 14 pig iron project in South Africa’s 12 Bushveld complex, targeting mining of 2.4m tons magnetite per annum to feed Number of companies 10 a 1,000,000tpa pig iron plant, with 8 potential for vanadium and titanium by-products. 6►► Black Mountain Resources joined 4 AIM via an introduction, raising no 2 new funds. The company, which has a primary listing on the Australian 0 Q3 2010 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Securities Exchange, is exploring for silver in the US, with first production targeted for Q4 2012. Black Mountain Admissions Delistings undertook the secondary listing on AIM in order to broaden its international Mining, Ausgold, Australasian investor base. Resources, Galileo Resources and Sovereign Mines of Africa. Changes to the Mining►► Namakwa Diamonds listed on AIM ► following the cancellation of its listing Eye index Readmissions In this edition’s quarterly index review, on London’s Official List (the Main Market) due to its inability to meet ►► Kibo Mining was readmitted to AIM ► there were just two index constituent free-float requirements. Namakwa has following the reverse takeovers of changes. EMED Mining replaced diamond operations in Lesotho, South Mzuri Energy and Mayborn Resource Bellzone Mining, following a relatively Africa and Namibia. The company’s Investments, adding coal and uranium strong share price performance market value at quarter-end was £38m. exploration assets to the company’s by EMED as it advances towards existing Tanzanian portfolio. production at its flagship Rio Tinto►► Praetorian Resources, an investment ► Copper mine. Bellzone Mining dropped company focused on the resources ►► Touchstone Gold was readmitted just outside the index following the sector, also listed on AIM, raising to AIM following its re-domiciliation disappointing performance of its share £20m. Current core investments from the British Virgin Islands to the price over the quarter. include A-Cap Resources, Ampella Province of Ontario, Canada.8 Ernst & Young Mining & Metals Mining Eye Q3 2012
  9. 9. Fundraising in Q3 2012 Chart 10. Quarterly trend of funds raised on AIM — mining and all sectors Source: Ernst & Young analysis of AIM market statistics 1,600 8,000 1,400 7,000 1,200 6,000 AIM total fund raised GB£m AIM funds raised GB£m 1,000 5,000 800 4,000 600 3,000 400 2,000 200 1,000 0 0 Q3 2012 Q1 2004 Q2 2004 Q3 2004 Q4 2004 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007 Q4 2007 Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Mining new issues GB£m Mining further issues GB£m AIM total issues GB£m (RH scale)With just £4m raised from new equity issues MB Holdings (through Mawarid conditions in the world coal market.in Q3 2012, and £81m from 34 follow Offshore Mining), Metalloinvest and Use of proceeds includes developmenton issues, total proceeds raised by the Anglo American. The proceeds will at the Vele colliery and part-paymentAIM-listed mining sector fell to their lowest be used to continue building the of acquisition costs for Chapudi.quarterly amount since Q3 2004. This company’s Seafloor Production Systemequated to a quarter-on-quarter fall of 12%, ►► Baobab Resources raised £4m through ► as it awaits resolution of its dispute withand year-on-year fall of 37%. The slowdown an equity subscription agreement the Papua New Guinean Government.in IPOs and equity financing was reflected with Redbird Investments. Redbird is Following the placement, Metalloinvestacross the market, with AIM total proceeds an investment vehicle of the African maintained its holding in Nautilus atsuffering a quarterly fall of 22%. Mining Minerals Exploration & Development 21%, Anglo American held 11.1% andsector fundraising accounted for 15% of SICAR SCA fund, a recently launched Mawarid increased to 16.9%.total proceeds raised across the market Luxembourg-based fund that is(Q2 2012: 13%). The largest issues are ►► Coal of Africa raised a total of £28.9m ► actively investing in brownfield mineraloutlined below: via the issue of shares with institutional projects, predominantly in Africa. investors, at a discount of 1.96% to the Proceeds will be used for completion►► Nautilus Minerals raised £21m via ► reference price. The board noted the of the pre-feasibility study on the a private placement that included support of its shareholders, particularly Tete iron ore project and ongoing participation by existing shareholders in light of the challenging market working capital. Ernst & Young Mining & Metals Mining Eye Q3 2012 9
  10. 10. Fundraising on AIM, 2006–2012Source: Ernst & Young analysis of AIM market statisticsTable 1. Fundraising on AIM, 2006–2012 Mining Mining AIM as % of all AIM Total Further Total Total New issues Further issues3 New issues issues issues issues proceeds No. No. of other Proceeds £m No. of money Proceeds £m Proceeds £m Proceeds £m Proceeds £m Proceeds £m % of new issues2 raising issues IPOs1 Q3 2012 1 5 4 34 81 84 243 317 560 15% Q2 2012 0 0 0 31 96 96 155 559 714 13% Q1 2012 3 2 22 44 228 251 51 870 921 27% Q4 2011 0 1 0 34 154 154 77 759 836 18% Q3 2011 4 4 20 18 114 134 271 414 685 20% Q2 2011 4 1 26 48 266 292 182 954 1,136 26% Q1 2011 0 4 1 46 634 635 77 1,564 1,641 39% Q4 2010 7 2 153 60 845 998 541 2,532 3,073 32% Q3 2010 1 5 43 38 57 100 291 854 1,144 9% Q2 2010 4 2 88 47 622 710 145 1,404 1,549 46% Q1 2010 1 2 7 32 189 196 242 694 936 21% 2011 8 10 47 146 1,169 1,215 608 3,690 4,298 28% 2010 10 14 291 180 1,714 2,005 1,219 5,484 6,703 30% 2009 0 4 1 195 1,029 1,030 741 4,696 5,436 19% 2008 3 4 77 148 1,003 1,080 1,079 3,215 4,294 25% 2007 9 16 148 185 2,302 2,450 6,829 9,610 16,439 15% 2006 28 31 618 123 1,081 1,699 9,909 5,734 15,643 11%1 Where AIM is the primary market of listing for the company’s first public issue of shares (does not include secondary listings).2 Includes introductions, secondary listings, transfers and readmissions (money raising and non-money raising).3 Funds raised from follow on issues of shares.10 Ernst & Young Mining & Metals Mining Eye Q3 2012
  11. 11. Index constituents selected at start ofeach quarterSource: Ernst & Young; Thomson Datastream Q2 2012 MV (£m) Q3 2012 MV (£m) Q4 2012 MV (£m) African Minerals 1,825 African Minerals 1,047 African Minerals 984 Kalahari Minerals 651 Kirkland Lake Gold 488 Kirkland Lake Gold 509 Kirkland Lake Gold 626 Highland Gold Mining 344 Sierra Rutile 391 Highland Gold Mining 430 Sierra Rutile 326 Highland Gold Mining 376 CoAL of Africa 407 Archipelago Resources 293 Archipelago Resources 345 London Mining 390 London Mining 270 Sirius Minerals 301 Archipelago Resources 372 CoAL of Africa 250 Pan African Resources 261 Nautilus Minerals 330 Pan African Resources 224 Patagonia Gold 234 Zanaga Iron Ore 322 Sirius Minerals 217 London Mining 204 Sierra Rutile 296 Patagonia Gold 195 West African Minerals 158 Patagonia Gold 290 West African Minerals 190 Zanaga Iron Ore 146 Sirius Minerals 280 Zanaga Iron Ore 166 Amara Mining 134 Pan African Resources 246 Bellzone Mining 129 Nautilus Minerals 121 Bellzone Mining 237 Nautilus Minerals 126 Gemfields 120 Eastern Platinum 231 Eastern Platinum 125 CoAL of Africa 117 Metminco 173 Gemfields 122 Eastern Platinum 108Petmin 156 Petmin 121 EMED Mining 108Cluff Gold 132 Metminco 120 Kryso Resources 105Gemfields 121 Cluff Gold 113 Petmin 98Frontier Mining 111 Kryso Resources 102 Metminco 95Top 20 market value £m 7,626 Top 20 market value £m 4,968 Top 20 market value £m 4,914Total universe market value £m 12,401 Total universe market value £m 8,533 Total universe market value £m 8,695Top 20 represent (%) 61% Top 20 represent (%) 58% Top 20 represent (%) 57% Shading represents index entrants Ernst & Young Mining & Metals Mining Eye Q3 2012 11
  12. 12. Contacts Ernst & Young Assurance | Tax | Transactions | Advisory About Ernst & YoungErnst & Young’s Global Mining & Metals Center Ernst & Young is a global leader in assurance, tax, transaction and advisory services.With a strong but volatile outlook for the sector, the global mining and metals industry is Worldwide, our 167,000 people are unitedfocused on future growth through expanded production, without losing sight of operational by our shared values and an unwaveringefficiency and cost optimization. The sector is also faced with the increased challenges of commitment to quality. We make a differencechanging expectations in the maintenance of its social license to operate, skills shortages, by helping our people, our clients and oureffectively executing capital projects and meeting government revenue expectations. wider communities achieve their potential.Ernst & Young’s Global Mining & Metals Center brings together a worldwide team of Ernst & Young refers to the globalprofessionals to help you achieve your potential — a team with deep technical experience in organization of member firms ofproviding assurance, tax, transactions and advisory services to the mining and metals sector. Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & YoungThe Center is where people and ideas come together to help mining and metals companies Global Limited, a UK company limited bymeet the issues of today and anticipate those of tomorrow. Ultimately it enables us to help guarantee, does not provide services toyou meet your goals and compete more effectively. It’s how Ernst & Young makes a clients. For more information about ourdifference. organization, please visit www.ey.com.Area contactsGlobal Mining & Metals France and Luxemburg Service line contactsLeader Christian Mion Global Advisory LeaderMike Elliott Tel: +33 1 46 93 65 47 Paul MitchellTel: +61 2 9248 4588 christian.mion@fr.ey.com Tel: +86 21 22282300michael.elliott@au.ey.com paul.mitchell@cn.ey.com IndiaOceania Anjani Agrawal Global Assurance LeaderScott Grimley Tel: +91 982 061 4141 Tom WhelanTel: +61 3 9655 2509 anjani.agrawal@in.ey.com Tel: +1 604 891 8381scott.grimley@au.ey.com tom.s.whelan@ca.ey.com United Kingdom & IrelandChina and Mongolia Lee Downham Global IFRS LeaderPeter Markey Tel: +44 20 7951 2178 Tracey WaringTel: +86 21 2228 2616 ldownham@uk.ey.com Tel: +613 9288 8638peter.markey@cn.ey.com tracey.waring@uk.ey.com Americas and UnitedJapan States Leader Global Tax LeaderKunihiko Taniyama Andy Miller Andy MillerTel: +81 3 3503 3435 Tel: +1 314 290 1205 Tel: +1 314 290 1205kunihiko.taniyama@jp.ey.com andy.miller@ey.com andy.miller@ey.comEurope, Middle East, India Canada © 2012 EYGM Limited. Global Transactions Leader All Rights Reserved.and Africa Leader Bruce Sprague Lee DownhamMick Bardella Tel: +1 604 891 8415 EYG no. OC00000235 Tel: +44 20 7951 2178Tel: +44 20 795 16486 bruce.f.sprague@ca.ey.com ldownham@uk.ey.com This publication contains information in summary form and is therefore intended for general guidance only. It is notmbardella@uk.ey.com intended to be a substitute for detailed research or the exercise of professional judgment. Neither EYGM South America and Brazil Limited nor any other member of the global Ernst & YoungAfrica Leader organization can accept any responsibility for loss occasioned to any person acting or refraining from action as a resultWickus Botha Carlos Assis of any material in this publication. On any specific matter, reference should be made to the appropriate advisor.Tel: +27 11 772 3386 Tel: +55 21 3263 7212wickus.botha@za.ey.com carlos.assis@br.ey.com www.ey.com/miningmetals ED NoneCommonwealth ofIndependent StatesEvgeni KhrustalevTel: +7 495 648 9624evgeni.khrustalev@ru.ey.com

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